Pitt v Holt
Trustees' decisions are voidable for inadequate deliberation only if they were in breach of fiduciary duty, and a voluntary disposition can be set aside for a serious mistake.
Facts
Mr Pitt received a large sum in damages for serious injuries. On professional advice, his wife, acting as his receiver, settled the money on a discretionary trust for his benefit, but the advisers failed to consider inheritance tax, and the settlement caused a large inheritance tax liability that could have been avoided. In a related appeal, Futter v Futter, trustees exercised powers on advice that failed to consider capital gains tax. In both cases, the parties sought to have their decisions set aside under the so called rule in Re Hastings-Bass.
Legal principle
The Supreme Court held that the rule in Re Hastings-Bass applies only where the trustees' inadequate deliberation amounts to a breach of fiduciary duty, and that trustees who rely on proper professional advice are not in breach, so the decisions in Futter could not be set aside on that basis. However, Lord Walker said that a voluntary disposition can be set aside on the ground of mistake if there is a causative mistake of sufficient gravity that it would be unconscionable to leave it uncorrected. Mrs Pitt's mistake about the tax consequences was serious enough, so the settlement in Pitt was set aside.
Related cases on trustees: duties, powers and variation of trusts
- Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515
- Butler-Sloss v Charity Commission for England and Wales [2022] EWHC 974 (Ch), [2022] Ch 371
- Chapman v Chapman [1954] AC 429
- Cowan v Scargill [1985] Ch 270
- Goulding v James [1997] 2 All ER 239
- Harries v Church Commissioners for England [1992] 1 WLR 1241
- Learoyd v Whiteley (1887) 12 App Cas 727
- Re Lucking's Will Trusts [1968] 1 WLR 866
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